Mars Charges Y&R With Contract Breach

by Steve McClellan, Mar 20, 2013, 6:00 PM

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This story has been updated from an earlier version.

What started out as a promising shopper marketing joint venture between a well-regarded specialist in the field, Mars Advertising, and WPP’s global agency Young & Rubicam has turned into a bitter court dispute. Mars has filed a breach of contract claim against Y&R in U.S. District Court in Manhattan for failure to fulfill numerous obligations in the venture contract.

Y&R has responded that Mars has chosen the wrong venue to sue in. It should have filed its claims in London, the home base of the established joint venture. Also Y&R argued that Mars now wants out of the venture, given that it has benefited from its association with the “highly regarded Y&R brand name,” and hopes to avoid paying fees owed to the agency that are spelled out in the joint venture agreement.

Y&R has countered with its own breach of contract suit in a London court, alleging Mars’ non-payment of fees and has asked that court to assume jurisdiction of the case. Both parties agreed on March 6 to hold off litigating in the London court until New York District Court Judge Colleen McMahon decides whether New York is the proper venue to litigate the case.

If she rules that it is, both sides have agreed to fight it out in New York. If she rules otherwise, the dispute will move to the London court.

After working together in the U.S. for some time, Mars, based in Southfield, MI, and Y&R agreed to form a London-based joint venture in May 2011 to provide shopper marketing services to European clients.  Mars alleges that Y&R failed to deliver numerous resources and services it agreed to under the contract.

Those services included providing office facilities, IT support and various other back office functions. Mars also alleged Y&R failed to deliver agreed upon “institutional capital,” including introductions to potential clients and “coordination services” with respect to shared clients including creative strategies, marketing plans, research and other materials.

In May 2012, Y&R launched Red Fuse, which also provides shopper marketing services and shifted client work to it that the Mars-Y&R venture had previously handled, in violation of the joint venture terms, Mars alleged.

As a result of Y&R’s breach of the contract terms, Mars argued it had “incurred substantial cost and lost business opportunities.” The question, the agency argued is “what happened after this UK Affiliation Agreement was executed…Proof of this is only in one place—the UK.”

Y&R also alleged that Mars was attempting to recast the entire purpose of the venture as “effectively a lease to provide physical premises and technical support” to the venture. Rather, Y&R argued, the agreement’s primary benefit to Mars was to provide it “use of Y&R’s name” in exchange for fees based on the gross net revenues of the venture. The Mars suit, concluded Y&R, “is really just the case of a party that has enjoyed the fruits of an effective association agreement but wants to avoid the unambiguous payment obligations that are the result of this success.”

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2 comments on "Mars Charges Y&R With Contract Breach".

1. John Wells from Self
   

   commented on: March 22, 2013 at 4:37 p.m.
   Y&R's other clients need to take note and sever ties with this bloated Madison Avenue dinosaur.
2. Paul Hollett from Light Fantastic Studios
   

   commented on: March 25, 2013 at 11:53 a.m.
   Surprises nobody but curiously the MediaPost email headline says "Mars Charges JWT With Contract Breach" ... not Y&R. A bit careless.

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